Politics and Economics Headlines - 12 September, 2005

China deploys warships to East China Sea gas fieldN.Onishi and H.French, NYT via SF Chronicle Tokyo - In a muscular display of its rising military and economic might, China deployed a fleet of five warships on Friday near a gas field in the East China Sea, a potentially resource-rich area that is disputed by China and Japan.

The ships, including a guided-missile destroyer, were spotted by a Japanese military patrol plane near the Chunxiao gas field, according to Japan's Maritime Self-Defense Forces. It is believed to be the first time that Chinese warships have been seen in that area.

Although the fleet's mission was unclear, the timing suggested that it was no coincidence. The warships appeared two days before a general election in Japan, whose results could greatly influence relations between Asia's two great powers, and weeks before China is scheduled to start producing gas in the area, despite strong Japanese protests. ... (11 September 2005)Informative article that goes into Taiwans significance for Japans shipping lanes and recent moves by Chinese and Japanese governments. -LJ

North American traders will be lured back to Mexico and Latin America and away from China and Asia, at least for some types of goods, as oil makes shipping costs prohibitive, say Jeff Rubin and Benjamin Tal, economists at CIBC World Markets.

"Suddenly, Chinese suppliers will look farther and farther away from their North American markets, while others, like Mexico, are about to get another turn at bat," they say in a paper released Wednesday. They predict that the price of crude will reach $100 (U.S.) a barrel by the end of 2007 -- an aggressive call -- and that the price of shipping manufactured goods will have to rise accordingly.

Indeed, transportation costs could rise to a point that they become a barrier to global trade, and it may already be happening, the economists say. "It would pretty well offset the trade liberalization efforts of the past four decades," Mr. Rubin said in an interview yesterday.

...goods that cost a lot to ship will be affected the most. From China, that list would include apparel, furniture, footwear, metal goods, textiles and industrial machinery.

...much of the CIBC World Markets argument depends on businesses believing that oil will indeed continue to climb, and stay expensive for some time to come, said Bernie Wolf, director of the international MBA program at York University.

"The world doesn't change on a dime," he said. "You won't make shifts if you're not sure these changes are relatively permanent." (9 September 2005)If you're interested, look at the original article quickly before it disappears from view at the G&M website.

Big Gav's weekend roundup of energy newsBig Gav, Peak Energy (Australia)If Energy Bulletin doesn't satisfy your addiction to energy news, check out the regular round-ups of news from Down Under. Big Gav serves up a large selection for September 11. (11 September 2005)

Politicians Let Big Oil Use Katrina to Pillage PublicJoel McNally, Madison Capital Times (Wisconsin) via Common Dreams It seems petty to complain about gas prices at a time when a major American city has been washed off the map and a half million of our citizens are newly homeless.

But petty resentments are what drive politics in this country. Political careers are built on whipping up small-minded hatred toward some of the most powerless groups among us - minorities, gays and liberal Democrats.

So it shouldn't be any surprise that a sudden surge of 50 to 75 cents in the price of a gallon of gasoline could have even greater political consequences than the Bush administration's incompetent cutting of flood control projects for New Orleans.

It's pretty bad that in 2004 the president slashed by 80 percent funding requested by the New Orleans district of the U.S. Army Corps of Engineers to hold back the waters of Lake Pontchartrain and made further cuts this year.

But what really gets folks' blood boiling is $3.50-a-gallon gasoline and the growing suspicion that local service stations, big oil companies and a government run by and for oil executives are playing us for fools.

As usual, the big players behind the scenes are the ones making out like bandits while the poor saps running the corner filling stations are taking most of the heat. (11 September 2005)

Despite all that, the 75-year-old expects to dip into his life savings to keep warm this winter, even with federal heating assistance.

"People are concerned but what the hell can you do?" said Smith, who lives alone with his cat Sam in a seven-room house built in 1820.

With fuel prices surging because of Hurricane Katrina, there are no guarantees heating oil won't hit an unprecedented $3 a gallon. And officials worry that federal heating assistance for the poor will fall short of what's necessary to keep people warm.

"Three-dollar-a-gallon gasoline is an inconvenience and a hardship. Three-dollar-a-gallon heating oil is life or death," said Beth Nagusky, director of Maine's Office of Energy Independence and Security.

A bigger proportion of homes in New England use oil for heat than in any other region of the country. It ranges from 70 percent in Maine to 39 percent in Massachusetts. (11 September 2005)

UK: Brown blames OPEC for fuel price risesManchester Evening News CHANCELLOR Gordon Brown today blamed the oil-producing countries of OPEC for the petrol crisis which has seen prices at the pump reach £1 a litre amid threats of protests by farmers and hauliers.

Denouncing OPEC as a "cartel" which had failed to respond quickly enough to the rising demand for oil from China, Mr Brown made clear that he wanted to see action by the end of this month to increase supplies and relieve pressure on prices.

The Chancellor acknowledged that the current oil shock was as grave as the crisis which produced years of recession in the 1970s, but insisted that a slump could be averted this time because of the stability of Britain's low-inflation economy.

And he played down speculation that he may be forced to raise taxes because of declining tax revenues from hard-pressed businesses, saying that they were offset by increased corporation tax from the oil industry. (11 September 2005)

The Globe and Mail has learned that the federal government is looking at options for a potential relief program that might end up taking effect only months before the next election, expected in early 2006. Ottawa has not decided whether to proceed, preferring to wait and see whether fuel prices remain strong heading into the winter heating season.

...The heating season is about to begin, with millions of oil furnaces in the East ready to start burning suddenly pricey fuel.

Heating oil prices, which set a record this week, have climbed by about one-third over the past year. The national average price was 89.9 cents a litre this week, up about 35 per cent from 66.3 cents in late September, 2004.

Natural gas prices are nearly double where they stood a year ago, with the October delivery price exceeding $11.30 (U.S.) per million BTUs. (9 September 2005)

Both the Franklin and Oil City school districts have locked in a fixed rate for the coming year, but in both instances, the price per 1,000 cubic feet (or decatherm) is higher than it was last year. They will pay more than $8 and $9 per decatherm respectively, and in light of the current prices, count themselves lucky. By contrast, all four of the local districts paid $3.23 per decatherm for the 1999-00 school year. ...

[Valley Grove] District business manager Tom Brink speculated the new rate will be "somewhere between $10 and $11." He said he has budgeted roughly $156,000 to heat the district's five buildings. The district used 15,835 decatherms of fuel last year. ...

"We are not dealing with supply and demand. It's the futures market. The people on Wall Street are making money at our expense on something that is not scarce. It's irritating," he said. "I don't mind gambling if it's according to logic. But this is the stock market," he added. (11 September 2005)

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